Turner Padget Insights

To Sue or Not to Sue: Protect Your Business Against Non-Compete Violations

Posted On Nov 05, 2014

Business owners invest time and money into setting themselves apart with unique product offerings, exceptional services or specialized customer retention strategies. They pass along their tricks of the trade to employees as they build their business. But it is information they don’t want leaving their control. What happens when an employee leaves the company and uses that information for his own benefit, or the benefit of his new employer? 

Oftentimes, businesses require employees to agree to non-competition provisions in their employment contract. The employee agrees not to unfairly compete with the employer’s business for a certain period of time after the employment relationship has ended. While non-compete provisions are generally disfavored in South Carolina, courts will uphold the agreements where the provisions are narrowly tailored to protect the employer’s legitimate business interests. Under South Carolina law, a non-competition provision must:

  1. be narrowly tailored to protect a legitimate business interest,
  2. contain a reasonable time limitation,
  3. contain a reasonable geographic limitation or restriction to not contact current customers, and
  4. be supported by adequate consideration (South Carolina courts will genserally treat future employment as sufficient compensation for the non-compete.  However, they will require some additional benefit such as a bonus or stock options if the employer asks him to enter a non-compete "mid-employment.").

If you determine that your former employee is likely violating a non-competition agreement, you need to decide your next steps. Even if you are not sure whether a particular employee’s violation is worth a protracted dispute, if you don’t enforce your rights at this juncture, you could undermine your ability to enforce a non-compete in the future, as “selective enforcement” counts against the employer. 

First, follow up with a “cease and desist” letter. Counsel can help you draft this letter to ensure you comprehensively identify your legal and contractual rights, the employee’s breaches, the injury you have or may suffer and the actions you request the employee take. 

Carefully worded letters demonstrate the strength of your case and your determination to enforce your rights. While “cease and desist” letters generally result in settlement negotiations between the parties, sometimes the former employer is forced to consider formal legal proceedings. 

If your non-compete meets the above-mentioned requirements, you should consult with counsel about seeking injunctive relief through the courts. Legal proceedings should be considered as a last resort, as litigation can be costly. But fighting to enforce your rights now can send a message to current and former employees, as well as to competitors, that you are willing to defend what you earned.